The first victim of the coronavirus pandemic in department stores is here: Dallas-based luxury chain Neiman Marcus is expected to file for bankruptcy as early as this week, according to a Reuters report. Sources familiar with the matter said the decision was due to the economic crisis caused by Covid-19.
It is not unexpected. After all 43 Neiman Marcus locations were temporarily closed on March 17, Bloomberg reported on March 23 that the company was in talks with lenders about a bankruptcy filing to ease its $ 4.3 billion debt. of dollars. He is also reportedly in the process of securing a loan of hundreds of millions of dollars from creditors to support his operations throughout the bankruptcy proceedings. Meanwhile, the majority of its 14,000 employees are currently on leave.
By filing for Chapter 11 bankruptcy, Neiman Marcus can stay in business while closing underperforming stores. It is not known if there is a plan for after filing – many businesses that go bankrupt don’t necessarily go away. Vox has reached out to Neiman Marcus for comment.
It is far from the only retailer feeling the pressure of the pandemic. While big box stores that sell groceries and other staples, like Walmart, Target, Costco, and Kohl’s, have been less affected than some anticipated, clothing-focused stores are taking a hit. serious financial difficulties. Retail sales fell 8.7% in March, the largest decline on record, and clothing and accessories sales mostly fell 50.5%.
So far, Gap has canceled orders for the fall season. JC Penney and Nordstrom are rumored to file a Chapter 11 case if store closures extend into the summer. Macy’s has laid off the majority of its nearly 130,000 employees. Rent the Runway has laid off all of its in-store staff on Zoom. Although brands have focused their efforts on online sales, most retailers say they don’t expect online orders to make up for lost in-store purchases, according to a report from the company. Forrester market research and the Narvar retail platform.
“Retail has hung a closed sign on the door, literally and metaphorically,” Neil Saunders, managing director of GlobalData Retail, told The Associated Press. “This is the most catastrophic crisis retailing has ever faced – worse than the 2008 financial crisis, worse than September 11th. Almost overnight, the retail economy has gone from what people want to what they need. “
It’s also not as if physical retail was booming before the coronavirus pandemic. Over the past decade, Americans’ buying habits have changed dramatically, thanks to the advent of online shopping, same-day delivery, and direct-to-consumer startups. While many stores have invested in turning their locations into “experiences,” corporate giants like Sears, Family Dollar, Toys R Us, Claire’s, Forever 21 and Payless have struggled to adapt to customer expectations.
What has been called the “retail apocalypse” over the past 10 years is rapidly accelerating due to the coronavirus. Analysis by retail tracker Coresight Research suggests that more than 15,000 stores in the United States may close permanently, compared to 9,500 that closed last year.
If the U.S. department store was already in decline, the coronavirus may be what completes the job. It is almost certain that Neiman Marcus is just the beginning.
